Comparison of Recycling Modes of Closed-Loop Supply Chain Under Carbon Trading Mechanism

Under a cap-and-trade mechanism, this paper investigates the optimal recycling channel selection within a closed-loop supply chain (CLSC). We construct three distinct Stackelberg game models - manufacturer recycling (M mode), retailer recycling (R mode), and third-party recycling (T mode) - by incorporating decisions on forward carbon abatement technology investment and reverse logistics efforts into a unified framework. Analytical and numerical results demonstrate that government-allocated free carbon quotas enter the manufacturer’s profit function as an additive constant, shifting the absolute financial baseline without altering optimal decisions or mode rankings. Comparative static analyses show that while the direct manufacturer recycling (M mode) consistently yields overwhelming economic dominance across the feasible parameter space due to the elimination of reverse double-marginalisation, its environmental efficiency is conditional. Specifically, when the carbon intensity of remanufactured products exceeds the threshold or the consumer recycling price falls below the critical value, the retailer recycling (R mode) demonstrates stronger environmental resilience, generating higher per-unit carbon reductions. These findings indicate a critical trade-off between economic and environmental objectives in decentralised supply chains, suggesting that environmental regulations, transfer-pricing mechanisms, and channel structures must be coordinated through an integrated governance framework.